Big tax deal brewing to keep Anheuser-Busch Plant Open

In 1994, the Miller Brewing Co. shocked Central New Yorkers by closing what many assumed was a recession-proof business — its brewery in the Oswego County town of Volney.
The closing killed 900 local jobs, and Oswego County has struggled ever since to recover.
Government officials in neighboring Onondaga County worry that Central New York’s only other major brewery, the Anheuser-Busch plant near Baldwinsville, just 16 miles south of the Miller plant, might face the same fate

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Anheuser-Busch, the maker of Budweiser and many other beer brands, agreed not to close any of its 12 U.S. breweries during the five-year term of its current labor contract.
But the agreement expires in February 2014. And officials fear that Busch’s new owner, Belgium-based InBev, might close breweries after the agreement ends. InBev has a reputation of being more profit-oriented than the brewer’s former management, the Busch family.
Although InBev has made no threats to close the Baldwinsville plant, those worries are a big reason why the administration of Onondaga County Executive Joanie Mahoney, the town of Lysander and the Baldwinsville Central School District are negotiating a deal that will save the Baldwinsville brewery more than $6 million in property taxes over the next 15 years.
The deal, which has been approved by the county Legislature and awaits an OK from the town council and school board, would slash the brewery’s taxes in exchange for a pledge by Anheuser-Busch not to close the plant for 15 years.
“The school district, the town and the county all want to send a clear message: We all want to help the plant be competitive,” said Deputy County Executive Bill Fisher.
The Baldwinsville plant’s strengths include access to plenty of cheap water and expertise in producing specialty brews, a growing market. The brewery produces more than 50 of Anheuser-Busch’s brands.
Its workforce of a little more than 400 is less than half the size it was in the 1990s. Many of the reductions occurred before InBev’s $52 billion takeover of Anheuser-Busch in November 2008, but they have continued under the new owner.
When it announced the takeover three years ago, InBev told investors it expected the merger of the two companies to create $1.5 billion in cost savings by 2011. The company financed the purchase with $45 billion in debt.
Adding to the concerns is the economic recession’s impact on beer sales.
In the first half of 2011, Anheuser-Busch InBev’s worldwide total revenue grew 4.6 percent, but its U.S. beer sales fell.
Beer shipments in the U.S. fell 2.5 percent in the first half of 2011 and 3 percent last year. Union officials at the Baldwinsville plant say it is running at about 50 percent of capacity.
“Any global company like InBev, faced with a shrinking market, is going to have to decide if they have overcapacity,” Fisher said. “We saw that with Miller.”
Concern about a potential plant closing is not the only reason for the tax deal.
In December, the local governments agreed to lower the plant’s assessment from $96 million to $75 million. But in July, the company filed a new challenge to its assessment, saying the brewery’s market value was only $35 million.
That raised worries that the company could get a court to knock down the brewery’s assessment even further. Under the deal being cut with Anheuser-Busch, the brewery would still be the town’s biggest property taxpayer, contributing nearly $2 million a year.
Though employment has fallen, the brewery remains the Baldwinsville area’s largest employer. And it pays well — about $28 an hour for production workers. Workers at the plant receive a fringe benefit that most beer drinkers could only dream about — two free cases of the beer of their choice each month.
St. Louis-based Anheuser-Busch has also been a major sponsor of community events and a popular facility in Baldwinsville. In 2000, the company donated $250,000 of the $300,000 cost to build an outdoor concert stage on the village’s Paper Mill Island beside the Seneca River. The Budweiser Amphitheater is home to weeknight and weekend concerts during the summer.
Mum on any closings
Anheuser-Busch officials would not comment on whether they are considering closing any breweries. Asked about its plans for Baldwinsville, the company’s headquarters issued a statement from Steve McCormick, the brewery’s general manager, that said the company was working with local taxing jurisdictions to craft an agreement “that will help the brewery to remain viable and provide tax revenue for the local community.”
“Our objective is to grow volume and increase production at each brewery,” the statement said. “Anheuser-Busch has been a leading employer and contributor to the local economy since 1983 and we look forward to continuing a positive relationship with the greater Syracuse community.”

The brewery was built on a 370-acre site off Route 31 by the Joseph Schlitz Brewing Co. in 1975. Schlitz closed the brewery in 1980. Anheuser-Busch bought it from Schlitz in 1981 and, after substantial modifications, reopened it in 1983.
Lysander Supervisor Barry Bullis said InBev has not even hinted it might close the brewery. But InBev makes each of its 12 U.S. breweries compete with each other for work, giving new production lines to those that can make beer at the lowest cost and taking lines away from those that can’t, he said.
“They’re bottom-line driven,” he said. “There’s not a lot of that Kumbaya feeling.”
Production at the 1.6-million-square-foot brewery has fallen in recent years. The company does not generally disclose its production levels at individual plants. But court records from the brewery’s tax assessment fight show that beer production at the plant fell 20 percent from 7.7 million barrels in 2003 to 6.1 million barrels in 2007.
The records contain only partial information on overall production at the plant in 2008 and 2009. But they show that the plant’s production of Budweiser — Anheuser-Busch’s flagship brand and the top-selling beer in the country — fell 55 percent from 1.9 million barrels in 2003 to 852,233 barrels in 2009.
The company said the drop in production was “due to a decrease in customer demand across the beer industry.”
According to the Brewers Association, a trade group that represents American beer makers, beer sales in the United States fell 3.3 percent by volume from 2008 to 2010. Association Director Paul Gatza said the decline likely is related to the poor economy.

Automation vs. jobs
In 1992, 1,100 people worked at the Baldwinsville plant. While InBev has promised not to close any breweries during its labor contract, it has not promised to keep all the jobs.
The company refuses to say how many people work at the brewery now. But while fighting its tax assessment in 2009, Anheuser-Busch’s lawyers reported that the plant had 475 full-time employees that year. Steve Richmond, president of the Teamsters union local at the plant, put the current number at between 425 and 450.
The reductions have occurred quietly. Richmond said all have been through attrition — not replacing those who leave or retire — and from other voluntary separations. There have been no permanent, involuntary layoffs, he said.
New technology has allowed the Baldwinsville brewery to automate its beer-making and bottling processes, so it needs fewer people.
During a recent tour of the brewery, a machine filled up to 1,200 bottles a minute with Margaritaville Spiked Lemonade, one of the plant’s new products. Just one production worker watched over the bottles as they flew by on a conveyor system to a second machine that attached labels.
Electronic scanners checked each bottle’s volume and label. If any were wrong, the system knocked them off the line. A second production worker occasionally pulled a bottle to manually check the label.
Nearby, another machine filled up to 1,500 cans of Michelob Ultra every minute, sealed their tops and sent them speeding to packaging machines.
Not far away, fully automated forklifts called “smart loaders” — driven by onboard computers, not human beings — picked up large stacks of beer and other beverages and drove them to the plant’s warehouse or right onto delivery trucks. The forklifts, equipped with electronic eyes, stopped when a visitor walked in front of them, then continued on their way after the human stepped aside.

“The company has invested a lot of money in modernizing the property,” said Richmond. “It’s highly automated.”
New brews land here
That modernization allows the Baldwinsville plant to quickly switch production from one brand to another.
“They’ve learned to be very nimble,” said Fisher.
The Baldwinsville brewery is one of only two Anheuser-Busch plants in the U.S. that packages Michelob Ultra — a low-calorie, low-carb version — in special slim cans. (The company’s brewery in Fort Collins, Colo., is the other.)
Since spring, the Baldwinsville brewery has been the exclusive maker of Bass Ale, an InBev product, for the U.S. market.
In addition, the brewery has begun producing flavored alcoholic beverages, such as the spiked lemonade, and special brews such as the Shock Top line of citrus-flavored wheat beers.
In July, the Chicago Tribune reported that Goose Island Beer Co., a craft beer maker bought by Anheuser-Busch this spring for $39 million, will switch production of its 312 Urban Wheat Ale from Chicago to Anheuser-Busch’s brewery in Baldwinsville. The switch prompted one headline announcing that 312 (named after a Chicago area code) will now be made “courtesy of area code 315.”
Bullis said the plant is competing with other Anheuser-Busch breweries for another new product line — a beer packaged in a 24-ounce can. He’s hoping the cut in property taxes helps the plant get that line and others.
“We want this to be a thriving entity,” he said.

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